The Post DTC Era 2

Re-tale Retail

Almost 20 years ago, I read a book called “The Art of Possibility”. I loved this book. I love this book. I will write more about this book another time. I return to a lot of the lessons of the book, but there is one particular phrase/definition that I think about all the time - it is:

“A cynic is just a passionate person who refuses to be disappointed again.”

I love this reframe because I believe it is true. There is passion under the pain. There is energy under the disappointment.

I apply this same reframe to the word suspicion. Something like - suspicion is just curiosity with more experience. Like, I know it can go right, but experience has shown me the seventeen ways this thing can go wrong.

And it is the work of overcoming our experiences to remain open and curious about new possibilities and outcomes.

Intro over. Now this:

I am suspicious of certain businesses and business practices because I have experience in those areas. But I am also curious, because experiences vary, and mine is a very specific experience in a very specific industry, during a very specific time. Lately, I’ve been tracking down design books and articles from the late 70’s to early 90’s - a time when I was alive, but I wasn’t aware of stuff yet.

I love movies. Not films. Movies. Movies provide me with all the metaphor and illustrations for everything area in life. I took my 10 year old daughter to her yearly well-check at the Pediatrician the other day. The Nurse asked, do you have any specific questions for the Doctor today? And I said, in a very casual way, “Just the general puberty and pre-puberty questions.” When the Nurse left the room, my daughter looked at me and was like “Really, Dad!?” And I was like, Oh, I’m in a SitCom; I’ve seen this episode before. Ha!

I love movies that break down complex problems or histories into simple systems.

Like Moneyball.

The TLDR synopsis is: Some baseball teams have a big budget (NY Yankees) to acquire players for their teams, some do not (Oakland As). But the problem is that the small budget teams are trying to do what the big budget teams are doing. But they can’t. So rather than do business as usual, the low budget team hires a young economics graduate from Yale who has a completely different approach to the game.

The economist, played by Jonah Hill, just breaks it down - How do you win baseball games? By getting more runs. How do you get more runs? By getting more people on base. That’s it.

So they adapt their whole recruiting/buying/trading program to acquire players that “get on base.” That’s it.

Get. On. Base.

This sounds like Seth Godin’s “Ship It”.

In some ways, I see the DTC decade as a “get on base” business move against the lethargic mass of brick and mortar and traditional retail. Start-ups came in fresh, digital first, and met the beefy millennial market straight on. Disruption was actually a byproduct of a new way of doing business.

When I say “Start-Up” we all tend to think of something kinda tech oriented, mixed with some idea around investors, or silicon valley, or venture capital. There’s a lot of nuance to the image in our brains, but generally, I think it’s safe to say, we imagine a business that has a lot of cash and they need to move fast. It’s not exact, but it’s the vibe around start-up language.

Let’s expand that vibe.

If you are an individual making something and then selling it - you are running a start-up. You can be bootstrapped, borrow money from your parents, use credit-cards, whatever - if you are bringing something to market, and you’re new, you’re running a start-up. I ran my first start-up at 12 years old.

Ok, back to the DTC thing and retail. The marketing messaging of the DTC’s is largely around two main points:

1. DTC companies provide greater value in relationship to price. They either tell you directly, or imply, that they are removing friction in the system by selling directly to you.

2. Retailers are greedy and old school.

In theory this is kinda true, except for the greedy retailer part. That’s a judgement, and it’s unhelpful. Greed is a narrative, not data.

DTC’s do remove a specific kind of friction from the manufacturing to consumer pipeline - it just gets placed in another spot. So the DTC’s definitely had a Moneyball sort of insight - why enter into this clunky system of trying to get retailers to buy my stuff, when I can just go directly to the customer?

There are no rules. Traditions aren’t rules, they are stories. DTC decided to write a different story. And they sold that story to a lot of investors and a lot of customers, but something now doesn’t seem to be working. A lot of DTC start-ups in home space have never made it to profitability. Many shuddered after a year or two. That’s a normal-ish small biz statistic anyway. Most businesses fail, and fail within the first few years.

I make furniture. So I always have my eye on the DTC furniture start-ups - the ones that tried to make something more affordable for customers by reducing their margin - not one has made it.

The designs were great, the branding was great - what happened?

Now, I know some of these businesses. Almost all of them failed because they ran out of money. And they ran out of money because it costs A LOT of money to get eyes on your products. The biz term is Customer Acquisition Cost. In business math, if you spend more money acquiring customers than your customers actually spend, that’s a problem. You can run out of money a lot of ways, but this seems to be the common one. And often, it’s not done in bad faith - most businesses aren’t out there to scam you - it’s a misalignment between vision and operations (a theme I will come back to a lot).

Amidst the meandering, here is the point I am coming to: We all need to get eyes on our products. And for the first time in history, manufacturers had access to digital tools that allowed them direct access to directly market products directly to consumers. Directly.

Long story short, manufacturers and start-ups, marketed the promise of high quality and stylish products at a lower price point. Love it. Oh, and with free shipping and free returns. Great promise, if all the math works on the backend.

When the start-ups realized that direct digital marketing wasn’t getting the sales conversions they needed, they started moving towards collaborations and partnerships and shop n shops. Why? To get eyes on their products. So they were spending money marketing directly, but then also started doing trade shows - because there was a giant embedded industry already operating. Surprise. Surprise.

All all all that to say - they realized they needed to TRIANGULATE their strategy in order to cultivate trust and credibility within an already existing marketplace. Which is the nice way of saying - they needed more eyes, and an existing audience was the quickest way to get there! This is true.

Thus, a main pillar of the Post DTC Era will be: A Renaissance of Retail. In the act of being a mediator between manufacturer and customer. As an active selector, editor, curator. Someone who has an opinion. A point of view. Someone who says, this stuff is IN, this stuff is OUT. A gate keeper.

Not an all out RACE to-the-bottom-must-get sales at all costs. It’s more like an enjoyable evening walk with friends, and you stop and pet the dogs, and smell the flowers, say hi to the neighbors - that kind of retail.

We need to re-tale retail.